Climate change and fuel poverty targets are “in jeopardy” according to business leaders from the Green Deal Finance Company.
Members including Willmott Dixon, Carillion, Marks & Spencer and Travis Perkins have written to senior government officials to complain that a lack of funding is putting their plans to provide Green Deal loans on ice.
In a letter to Deputy Prime Minister Nick Clegg and cabinet members including Vince Cable and Ed Davey, seen by Construction News, 15 signatories state that TGDFC needs £40m in start-up funding to cover initial construction and early operating expenditure and a further £260m from the Green Investment Bank to secure access to capital market funding.
The letter states: “A delay to the tranche of start up funding required by [TGDFC] means that work on funding the scheme has been halted.”
It continues: “… the requirements for Providers to meet the initial funding being placed upon it by Government cannot be met. The expectation that members of TGDFC take an equity stake is both unrealistic and undermines the not for profit’s core purpose of the vehicle - to be off the balance sheet.”
CN understands the letter was not approved by all members of TGDFC and was intended to represent companies of different sizes to give an overall representation of the group.
New members of TGDFC including Kier and Skanska (see box) are not signatories to the letter.
One member told CN the letter was not about TGDFC being in meltdown or facing a catastrophe, but was about “making clear to the government” the level of support needed.
The initial funding is expected to be used for back-office functions including IT requirements; outsourcing and achieving due diligence with credit rating agencies, as well as start up costs for establishing the company and its employees.
The Green Deal Finance Company
CN reported the finance company was being established in September 2011 and Carillion were one of the first companies to became involved when details of the founding members were revealed the following month.
Skanska, Kier and Keepmoat were among 21 new organisations to join the company last month.
The group states that there are “no foreseeable circumstances” in which members would provide capital to TGDFC.
Commenting on its decision to hold development in light of funding constraints, the letter states that there will be a “significant risk to both Providers and any early adopting consumer”.
One of the founding members of TGDFC PwC’s partner Paul Davies said the group was having “good discussions” with government regarding financing.
Signatories to the letter include: Kingfisher Future Homes; British Gas New Energy; Carillion; Marks & Spencer; Wolseley; Travis Perkins; Scottish Power; Scottish and Southern Energy; NPower; E.On; Gentoo; Insta Group; The Mark Group; Willmott Dixon and SIG.
He added: “The funding will allow us to develop financing models and gear up for refinancing in conjunction with bank / GIB financing. While we’re we’re waiting on a decision, it makes sense to hold off on further development to minimise costs.”
A government spokesperson said: “The Green Deal Finance Company is a commercial organisation which has submitted a business plan for Government investment.
“Discussions on this plan are ongoing but we cannot comment on any specific commercial detail. The Green Deal has been identified as a priority sector for GIB investment and UKGI will consider proposals from any commercial organisation interested in helping to deliver the Government’s proposed Green Deal.”
TGDFC is expected to take up to nine months to complete its start-up operation and be in a position to lend money to Green Deal providers, however this is expected to cause delays.